We explore the different investing options for kids and what is available with marketplace lending.

I have two kids, aged 10 and 8, and unlike pretty much every other kid their age, they both take a keen interest in marketplace lending. And this is not just because their dad is heavily involved in the industry but because they both have Lending Club accounts in their own name.

I opened UTMA accounts at Lending Club late last year (more on UTMA accounts below) for both kids and transferred the money that was sitting in their savings account (earning less than 0.1% interest). They have been saving a minimum of $1 a week from their allowance as well as a large portion of any gifts they receive from their grandparents. We track these amounts and then contribute new money to Lending Club 2-3 times a year. Now, my son will often say on allowance day, “Just put it all in Lending Club this week”. My daughter likes to spend her money so she usually just does the minimum.

So, what are the investment options for kids? I have written over 1,000 articles on Lend Academy since 2010 and have never discussed this topic so here goes.

The entire paper is over a hundred pages and covers a lot of ground delving into many of the details of the small business lending landscape. To get some background and understand the goals of the paper we spoke with Brayden McCarthy to learn more.

Brayden stated that there were two goals with the paper. The first one was to lay a foundation for regulatory reform, seeking a balance between protecting borrowers and investors in the small business online lending market while at the same time encouraging the innovation that has already led to broader access to credit for small business owners. He noted that 50-100 years ago was when many of today’s regulations were put in place when there was obviously no concept of online lending so it is certainly time for a new framework.

The second goal was to focus on incumbent banks and how they can partner with this new industry. As Lend Academy has discussed in the past, bank partnerships are a big part of the online lending industry and we predict 2017 will be an even bigger year for partnerships. In the paper they put forward their views on what strategies will differentiate the winners from the losers and they go into some detail on the different kinds of partnerships that are in place today.[Read more…]

After months of speculation the OCC lays out their plans for a new national fintech charter in a paper released today.

The Office of the Comptroller of the Currency (OCC) has been regulating national banks since the time of Abraham Lincoln. The head of the OCC, Thomas Curry, has talked about using the authority of his office to create a special purpose fintech charter. Today, at a speech in Washington DC he laid out his plans.

Along with this speech the OCC released a paper titled, Exploring Special Purpose National Bank Charters for Fintech Companies which is available on their website. It goes into some detail about their plans and what they are trying to achieve with this charter. The OCC has requested public comment until January 15 and I am sure they will be inundated with responses.

This new charter goes beyond just lending platforms, it has quite a broad scope. From the white paper:

A special purpose national bank may limit its activities to fiduciary activities or to any other activities within the business of banking. A special purpose national bank that conducts activities other than fiduciary activities must conduct at least one of the following three core banking functions: receiving deposits, paying checks, or lending money.

How the New Fintech Charter Applies to Marketplace Lending

We reached out to Brian Korn, a partner with Manatt, Phelps & Phillips to give his initial thoughts on the new charter. Here are some of these thoughts: [Read more…]

PeerIQ and TransUnion plan to develop a suite of data transparency solutions for the online lending industry.

Today, PeerIQ announced a partnership with information solutions provider TransUnion. PeerIQ is known for its data and analytics capabilities in the marketplace lending industry with a focus on securitizations. The goal with the new partnership is to provide transparency to the online lending industry through a suite of products and TransUnion’s access to originator data will play a big role in that. We spoke to PeerIQ CEO Ram Ahluwalia who said the partnership has been in the works for nearly a year.

According to the press release, they will be building an authoritative data and derived analytics solutions for the industry. While we will have to wait and see exactly what the new products entail it is not difficult to guess where this might be going. All the major credit bureaus receive data from lenders of all kinds including marketplace lenders. With this partnership PeerIQ is likely to have access to this data at least in aggregate form. They will be able to build all kinds of interesting products on top of this TransUnion data.

According to Ram Ahluwalia, CEO of PeerIQ:

Our partnership with TransUnion is a significant milestone for us, and together we intend to tackle the industry’s major challenges. Our clients are demanding through-cycle data histories, robust models and indices, cross asset-class comparisons and consensus valuation. We’re eager to meet those needs by uniting with the best data partner in the space.

To get a better idea of what this partnership means for PeerIQ and TransUnion, PeerIQ provided additional details about the partnership and why it is important.

What does this mean for the PeerIQ?

We’ve built powerful analytical tools that our clients use to quickly understand and represent their credit risk, but ultimately such tools depend on the quality and scope of the underlying data. Today, our platform offers insight into over $35B in loans across all major fintech lenders. Our TransUnion partnership affords a step-function change to that data advantage.

For the industry?

The industry needs standardization and transparency to unlock new pools of capital. There is significant variation on data representations. There are no consensus valuation, benchmarks, or loss estimates informed with pre-crisis data. These and other challenges add tremendous friction to the system. With TransUnion’s support, we are tackling these issues head on and introducing products that will reduce these frictions, increase investor confidence, and ultimately improve capital access.

When can we expect new product launches?

TransUnion has been a great partner, and we’re working steadfastly to get our first set of new products to market in early 2017. Stay tuned.

Conclusion

It’s important to remember that the success of the online lending industry is not reliant solely on the originators. The third party service providers like PeerIQ, TransUnion and others play a critical role in reducing frictions to investing. Investor confidence is crucial to a marketplace lending platform’s success and this partnership will help investors gain more transparency into the loans they are buying and bring new capabilities to the industry as a whole.

The short survey will only take two minutes and will provide Lend Academy with valuable feedback

It has been several years since we have done a reader survey here at Lend Academy and a lot has changed. We are about to make some enhancements to Lend Academy for 2017 but before we do that we want to take the pulse of our readership.

This is only a short survey so please spend just a couple of minutes of your time giving us feedback. You can take the survey here.

A new third party tool provides investors with a rich set of features for Lending Club's secondary market.

A new company called Croudify recently announced that their secondary market platform for Lending Club was launching in beta. The company describes itself as a secondary trading platform that allows you to find the best listed notes based on analytical models that they have built. I spoke with Abhishek Agarwal, Croudify CEO, to learn more about the product and also signed up for a beta account myself.

What made Croudify’s platform possible was the creation of Lending Club’s secondary market API last year. In fact, Croudify was the company that worked closely with Lending Club as they were developing the secondary market. Abhishek stated that after beginning work on their product in 2015 they eventually compelled Lending Club to build the API which was eventually made public.

One the key challenges of creating a valuable platform on top of Lending Club’s secondary market is the amount of data that needs to be collected and subsequently the cost associated with collection and storage of the data. This data is used to build Croudify’s pricing models. Croudify currently pulls FOLIOfn data every 5 minutes, which takes the company just one minute to index. According to Abhishek, the infrastructure cost for this is about $8000 per month.

The team at Croudify has an immense amount of experience in data analytics. Abhishek and their Data Scientist, Mauricio Santana both spent 10+ years building data/risk models for Bank of America. The platform, along with the analytical model they have built provides recommendations of notes to purchase on the secondary market, taking into account all data points on the loan as well as aspects such as prepayment and the markup/discount of a note. They hope to eventually provide portfolio automation for both the the primary market and secondary market for both retail and institutional investors.

I would like to take this opportunity to pause and say thank you. Thank you to all the Lend Academy readers who continue to include us in your online journey. We appreciate all the comments, feedback and encouragement that we receive throughout the year. It helps to make what we do here every day worthwhile.

I am grateful for all you do and I am thankful to be working in an industry that is making an impact on the world. On behalf of the Lend Academy team I would like to wish you and your family a Happy Thanksgiving.

LendIt will recognize the outstanding achievements of companies and executives at our new industry awards event.

At LendIt we are always looking to improve our conferences from year to year and part of that is adding to new offerings for the community. For 2017, the LendIt team decided that creating an industry awards event was the next project we would tackle. We are doing this because there are many companies who are doing great things in online lending and it’s important to recognize their accomplishments. The first annual LendIt Industry Awards ceremony and dinner will take place on March 7, 2017, following the wrap of Day 2 of LendIt USA 2017.

One of the important parts of running an awards event is the nomination process. We invite you to complete a nomination application for your company in one or more of the below 18 categories. Nominations have just opened and the deadline is December 21st, 2016. You can find the nominations for each award and learn more about the event on the LendIt awards website. Judging will be done by over 30 industry experts.

LendIt Innovator of the Year

Executive of the Year

Fintech Woman of the Year

Top Consumer Lending Platform

Emerging Consumer Lending Platform

Top Small Business Lending Platform

Emerging Small Business Lending Platform

Top Real Estate Platform

Emerging Real Estate Platform

Top Fund Manager

International Innovator of the Year

Top Law Firm

Top Accounting Firm

Top Fintech Equity Investor

Most Innovative Bank

Best Journalist Coverage

People’s Choice Platform

Best in Show

We look forward to seeing you at LendIt 2017. While the main purpose of the event is to highlight companies it also will be a great opportunity to network. Individual seats and tables are also available to purchase on the LendIt Website.

My latest quarterly investment results show an overall 8.21% return for the year ended September 30, 2016.

Every quarter I take some time to share how my marketplace lending investments have been doing. I open the kimono and take you inside my Lending Club and Prosper accounts, as well as many other investments, to share my returns. I do this because I believe in transparency and I want people to see how returns can change over time. I have been sharing these returns for almost five years now.

My list of accounts keeps growing. You will see in the table below that I now have 12 accounts – eight Lending Club and Prosper accounts (I know it is a little excessive) and four other investments. The new kid on the block this quarter is PeerStreet – listen to my podcast with their CEO Brew Johnson from earlier this year. PeerStreet is a real estate platform primarily focused on fix and flip properties – so short term loans. I like the marketplace lending real estate vertical and will be moving more money into this sector in the coming months.

Now, let’s get right to the numbers.

Overall Marketplace Lending Return Now at 8.21%

I am beginning to wonder when the decline will stop. I thought it would have stabilized by now but in Q3 my overall returns saw another substantial decline. I think it is safe to say that Q3 was my worst quarter ever when it comes to defaults at Lending Club. I have been focused on the higher risk end of the spectrum and those loans with vintages in 2014 and particularly 2015 continue to perform worse than previous years. Both Lending Club and Prosper have increased interest rates several times this year as well as tightened their underwriting and that will help going forward. But because these are three and five year loans I am investing in I won’t be seeing the benefit in my returns here for quite some time.

Credify is a new platform that began operations over the summer and is headed up by Renaud Laplanche.

Today we got a glimpse of what former Lending Club CEO Renaud Laplanche has been working on since he resigned from the company earlier this year. The big news was first covered in this Wall Street Journal article and it appears as though he is building another online lending company.

While a lot of details are not known about the new company, here is what we do know:

The new company is called Credify Finance Corp and will be an online lending platform.

It is headquartered in San Francisco’s financial district and was incorporated on May 31, 2016.

Former Lending Club executives Jeff Bogan and Adelina Grozdanova are working with Renaud on the new venture.

Thomas Curran, who previously worked at Promontory Financial Group, a regulatory consulting firm and at the Treasury Department’s capital-purchase program, is serving as Credify’s compliance officer.

The company hopes to begin extending credit in 2017 with estimated revenues of $50 million.

No one has played a bigger role than Renaud in shaping the course of online lending over the past decade so I think it is a real positive that he is staying in the industry. What will be most interesting is to see how the company will differ from Lending Club now that Renaud is able to build a company from scratch with all the knowledge he has gained from his decade leading the industry.

We reached out to Renaud but he declined to make an official comment for this story.

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Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.

The Lend Academy team loves peer to peer lending and our staff have all invested their own personal money in one or more of the platforms. Lend Academy Media is part of Cardinal Rose Group which also owns LendIt, the leading industry conference, and has a majority interest in NSR Invest.